Athens is seeking more bids from bondholders after failing to meet a target to buy back bonds worth €30bn
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Athens is seeking more bids from bondholders after failing to meet a target to buy back bonds worth €30bn
Athens officials expect to learn today when loan tranche will be paid, as Moody’s one-notch downgrade of France causes little alarm in the markets
In the heart of Europe, a democracy now teeters on the edge
In spring 2010, as Athens wrangled with the IMF and the rest of Europe for what would turn out to be a €110bn emergency loan, a revealing, chilling phrase slipped out. When Greece’s then-premier, George Papandreou, begged for easier borrowing terms, he was told by Angela Merkel that the deal had to hurt. According to a well-sourced report in the Wall Street Journal, the German chancellor said: “We want to make sure nobody else will want this.”
She certainly made good on her side of the deal: Greece has spent the past two years on a financial life-support that has kept its government ticking over, but which has destroyed its economy and pushed its entire democracy to the brink of collapse. This week, Athens re-enacted what has become a traditional ritual. Under duress from its troika of creditors (the IMF, the European commission and the European Central Bank), the government identified more areas for cuts and deregulation: another 8,000 civil servants to be sacked by next Christmas, yet more slashing of pensions and wages and of the minimum wage. Meanwhile, the country went on a general strike and petrol bombs were lobbed at the Vouli, the parliament, even as MPs voted through the package. If the government also passes its 2013 budget this Sunday, it will get another chunk of cash to keep paying salaries and other bills.
The price of the severest austerity programme ever imposed on postwar western Europe has been severe. Greece’s economy is in severe depression: this year its annual national income is projected to be 23% below what it was in 2009, that is to say that nearly a quarter of everything the economy used to produce has disappeared over three years. Partly as a result, the debt burden will soon be three times GDP. Unemployment has skyrocketed, with one in two young people out of work.
Extreme policies in; extremist politics out. From being a rump just three years ago, the neo-Nazi Golden Dawn now effectively polices parts of Athens and has infiltrated the official police force. The centre has collapsed: after acceding to Mrs Merkel’s terms, Mr Papandreou’s Pasok has gone from being a reliable centre-left party of government to a husk of its former self. Journalists who threaten to show any independence of mind, such as the admirable Kostas Vaxevanis are hounded by officials.
In the heart of Europe, a democracy now teeters on the edge. True, most of the blame for this is that of a corrupt Greek elite that has dominated politics, business and media for many decades. But the rest of the eurozone is also guilty: first for enforcing impossible austerity, then for turning a blind eye to the predictable results. Mrs Merkel was surely right: no other country – in Europe or elsewhere – would want this.
Police in Athens are target for petrol bombs thrown during a demonstration on the second day of the 48-hours general strike against new austerity measures
Read the original: Greek protesters clash with riot police – in pictures
Greek shares fall 5% on concerns talks between Athens and its rescue lenders are not progressing as smoothly as hoped, with banks hit hard.
Read more here: Greek shares fall on debt talks
Second general strike in less than a month takes place amid latest round of draconian measures
Vanna Mendaleni is a middle aged Greek woman who until now has not had vehement feelings about the crisis that has engulfed her country. But that changed when the softly spoken undertaker, closing her family-run funeral parlour, joined thousands of protesters on Thursday in a mass outpouring of fury over austerity policies that have plunged ever growing numbers of Greeks into poverty and fear.
“After three years of non-stop taxes and wage cuts it’s got to the point where nothing has been left standing,” she said drawing on a cigarette. “It’s so bad families can no longer afford to even bury their dead. Bodies lie unclaimed at public hospitals so that the local municipality can bury them.”
As Greece was brought to a grinding halt by its second general strike in less than a month, Mendaleni wanted to send a message to the Greek prime minister, Antonis Samaras, and other EU leaders meeting in Brussels.
“We once had a life that was dignified. Now the country has gone back 50 years and these politicians have to be made aware that enough is enough.”
Greek demonstrations are not now marked by the vehemence or violence of the mass protests that occurred when Europe’s debt drama erupted in Athens, forcing the then socialist government to announce pay and pension cuts, tax increases and benefit losses that few had anticipated. Anger and bewilderment have been replaced by disappointment and despair.
But the quiet fortitude that has been on display could soon run out in the country on the frontline of the continent’s worst crisis since the second world war. For on Thursday demonstrators were sure of one thing: if pushed too far they may be pushed over the edge.
“Personally, I’m amazed there hasn’t been a revolution,” said Panaghiotis Varotsos, a computer programmer.
“In Portugal they’re rioting over one measure when here we’ve been made to accept countless cuts and tax increases. And the worst thing about being ground down is that it breeds extremism,” said the silver-haired leftist. “In the case of Greece it is extremism that is going to the right because [the neo-Nazi party] Golden Dawn has managed to exploit people’s despair. But it won’t just stay here. It will spread, like this economic crisis, to other parts of Europe, too.”
For the vast majority of those who took to the streets, the tipping point could be the latest round of austerity measures being demanded of the debt-stricken country in return for the international rescue funds it so desperately needs to keep bankruptcy at bay.
Under intense pressure from international creditors at the EU and IMF, Samaras’ fragile coalition has been forced to draw up a draconian package of spending cuts worth €13.5bn – the price of a whopping €31.5bn loan instalment that is already four months overdue. Officials have suggested the burden will fall on society’s most vulnerable with pensioners and low-income Greeks once again having to make the biggest sacrifices.
“After nearly 50 years of work and paying into an expensive pension fund, I have been forced to retire on €1,000 a month and if they pass these measures it will be even less,” said 60-year-old Nikos Xeros, who until this year had repaired ships since the age of 16. “It’s like having a noose about your neck that is getting ever tighter. The next time I come out to demonstrate it’s going to be with a gas mask and a big wooden club.”
Law enforcement officials cut off access to Syntagma Square – home of the Greek parliament – before protesters could reach it, stoking widespread fury on Thursday. For some it was evidence of the mounting fears that parliament could be stormed.
“Greeks are becoming increasingly conscious … and it was especially noticeable that the main slogan today was ‘the time has come to overthrow these polices’,” said Tania Karayiannis of the union of civil servants. As many as 80,000 people participated in the protests in Athens alone, she said. “The political leadership of this country should not underestimate that. If they don’t take our opposition seriously they will bear historic responsibility for the disintegration of Greece’s social fabric and the developments that will surely follow.”
Athens officials say it’s highly improbable that the €13.5bn package of EU-IMF mandated budget cuts will be put to parliament before November
Greek officials say friction with creditors means parliament’s approval doubtful despite desperate need for cuts-dependent aid
Greek officials have admitted that friction with international creditors was such it was unlikely a package of austerity cuts that have been set as the price of further aid would be approved by the Athens parliament before mid-November.
At no other time has near-bankrupt Greece so needed the €31.5bn (£25bn) in rescue funds dependent on the measures. With public coffers set to run dry by the end of November, the country could be forced to default on its debt mountain if there are further delays in the disbursement, put on hold since July.
The setback on Monday, the latest in four often tumultuous months of tortuous negotiations with the country’s “troika” of lenders – the European Union, the European Central Bank and the International Monetary Fund – has highlighted the difficulty in drafting draconian spending cuts so fiercely opposed by unions and political forces in a country already hit by record levels of unemployment and poverty.
“They are pushing us to the absolute brink,” said one high-ranking official at the labour ministry. “They don’t just want our jacket but our shirt,” he said, adding that Greece has already reduced its unit labour costs by a dramatic 15%.
With what the state-run TV channel NET called “open fronts” on all the main issues – including demands for up to 15,000 civil servants to be laid off immediately – it is now unlikely that the €13.5bn package of cuts will be approved by the Greek parliament before the next meeting of eurozone finance ministers on 12 November.
For the first time since assuming the post in June, Athens’ technocrat finance minister, Yiannis Stournaras, looked unusually downbeat as he emerged from talks with the prime minister, Antonis Samaras, and attributed the latest hurdle to the “tremendous amount of work” that the negotiations entail.
The conservative leader, whose fragile coalition reached a “basic agreement” on the measures last month, had hoped to attend his first EU summit on Thursday with the talks behind him and the package agreed. In an interview at the weekend, he confidently predicted that “we will have fully completed the agreement on the fiscal and structural prior actions for the disbursement” by the summit.
Addressing a business conference in Athens, the socialist Pasok leader, Evangelos Venizelos, said the financial lifeline was crucial for an economy about to enter a sixth year of recession and “for a society that has reached its limits”. Around €25bn of the cash injection will be used to recapitalise banks in the hope of re-energising Greece’s cash-starved economy.
The endless foot-dragging has exacerbated a fiscal and structural reform programme that is already badly off track. Missed targets have produced a “financing gap” that also appears to have added to the pressure of finalising the package.
The IMF announced last week that Greece’s debt looked set to increase from 170.7% of GDP to nearly 182% in 2013 – despite private sector creditors already taking a huge hit on Greek bonds.
The pessimism has added to the difficulty in making headway amid signs that lenders are reluctant to meet demands by the Samaras government for a two-year extension to the fiscal consolidation programme before the country commits to further reforms. Indicative of the frustration the stalled talks have produced, the Swedish finance minister, Anders Borg, raised the spectre of a Greek exit from the eurozone in the coming months. “It’s most probable that they will leave. We shouldn’t rule out this happening in the next half year,” he said, adding that a “Grexit” would not alarm financial markets.
The German chancellor insisted she was not in Greece as a task-master, but protesters outside were having none of it
Up close, Angela Merkel is very static. She stands immovable, her eyes flashing this way and that. In Athens, as she stood behind a lectern after talks with the Greek prime minister, Antonis Samaras, the German chancellor was so restrained she hardly moved at all.
The Greek capital resembled Fort Knox – with riot police guarding her every move, helicopters roaring overhead and marksmen installed on the rooftops of buildings great and small – but Europe’s most powerful woman was having none of it. The angry chants and hoarse slogans of the thousands of protesters who had also come out to greet her, eliciting one of the biggest security operations ever put on by near-bankrupt Greece, belonged to another world. As did the copious amounts of acrid teargas that wafted through the Athens air.
In the marble interior of the mansion that is the prime minister’s office, Merkel had a message and on this, her first visit to Greece since the eruption of Europe’s debt drama, it was a message she was determined to convey.
“I have not come as a taskmaster,” she said, her eyes elevated towards the room’s ornate sunlit ceiling as if focusing on some indefinable spot. “And nor have I come as a teacher to give grades,” she added, now focusing intently on the marble floor. “I have come as a friend to listen and be informed.”
Three years into the crisis that began in Athens, Merkel also wanted to say she understood “a lot” was being demanded of Greece. She was not the austerity warmonger that critics had painted her to be. “I come in full and firm awareness of what the people of Greece are going through,” she said. But, she continued, Europe’s weakest link was badly in need of change – and if reforms were not made now, they would come back “in a much more dramatic way”.
“I come from East Germany and I know how long it takes to build reform,” she said, almost by way of reassurance. “The road for the people of Greece is very tough, very difficult, but they have put a good bit of the path behind them. I want to say you are making progress!”
But even as the leader attempted not to sound like the matriarch in charge of the family till, there is no denying that that is exactly what she is.
“Saying that she is not here to preach is bullshit,” said one of the small retinue of Berlin-based journalists who follow her every move. “She is here to tell them exactly what to do.”
For the vast majority of Greeks, no person is more identified than Merkel with the punitive measures that have ensnared the country in unprecedented recession and record levels of poverty and unemployment.
As up to 300,000 took to the streets in an enormous display of fury over the savage cuts and tax increases that have brought growing numbers to the brink of penury, it was the woman who is widely seen as the “architect of austerity” that was in their sights.
“If I met her, I would say if you had read Greek history you would have been more aware,” said Takis Stavropoulos, a bearded leftist who had converged with thousands of other protesters on Syntagma square. “If she had done that she would have known we would resist.”
No government has been in as difficult a place as the ruling coalition that Samaras has led since June. Although Merkel’s surprise visit was seen as a major coup, with officials hailing it as further proof of Berlin’s new-found willingness to keep Greece in the 17-member eurozone, there was also an acceptance that the chancellor’s six-hour presence in Athens, while rich in symbolism, did not yield much in the way of substance.
Merkel’s Calvinist approach to dealing with Europe’s crisis-hit southern periphery may have softened, as the leader looks to re-election next year, but as tiny Greece stares into the abyss with enough funds to survive only until the end of next month, the message was clear: apply more draconian measures and the rescue funds will keep pouring in. Echoing the complaint of German commentators, Greek analysts agreed that the visit was long overdue.
“It is hard not to see this visit had a more important message for Germany ahead of [next September's] general elections than it did for Greece,” opined the prominent commentator Yiannis Pretenderis.
The sad reality remains. After the biggest debt write-down in the history of world finance and two EU-IMF-sponsored bailouts worth a mammoth €240bn (£190bn), Greece is still far from being saved and, worse, is slipping inexorably into social meltdown with its political arena ever more radicalised. The draconian €13.5bn package of spending cuts that is the price of further aid could, many fear, push Greece further to the edge.
Back at the heart of the government, untouched by the discord of everyday life, the awkwardness of Greece’s relationship with its big brother was on display in the body language of its prime minister. As Merkel, the pastor’s daughter, spoke, Samaras, whose background is privileged elite, Harvard and moneyed, looked on and winced.
“Greeks are a proud people,” he said. “And our enemy is recession. But we are not asking for favours. In my discussion with the German chancellor I pointed out, however, that the Greek people are bleeding.” As he spoke, Merkel remained static before pursing her lips and looking away.
Greek police have banned protests on some Athens streets tomorrow, when thousands of police officers and snipers will protect Angela Merkel